There are industries in which maximizing profit maximizes social welfare. Education is quite clearly not one of them, which is why the government generally pays for that in less capitalist societies than that of the US.
Good. Now go after the leadership.
@DmitriR there are some for profits which do add real value. For instance if you’ve ever had your hair cut, it’s likely that the hairdresser/ barber trained at a for profit. I believe there are a number of other trades which heavily rely on for profit trained employees although I can’t list them off of the top of my head.
Also as the New York Times found out, a number of for profits have [simply switched to non profit status](http://mobile.nytimes.com/2015/03/03/business/some-private-colleges-turn-a-tidy-profit-by-going-nonprofit.html?referrer=&_r=0) while still maintaining essentially the same educational standards. Whatever policy is put in place must address all schools, not just for profits.
@whenhen I don’t doubt that there are for-profits that do provide some value. My guess is that those that specialize in vocations where graduates have to pass some sort of certification process (medicine, personal services such as your hairdresser example, etc,) are less likely to be scams.
On the other hand, much of the sector is rife with what can only be described as fraudulent bad actors, who are largely in the business of harvesting Federal financial aid while saddling their “students” with high debt loads and inferior educations.
I agree that these problems are not confined entirely to the for-profit sector - grifters are going to grift, and non-profit status is no absolute predictor of integrity.
The net effect of the worst case $3.5B debt relief should not be $3.5B because debt relief income is generally taxable income reported to the recipient on Form 1099-C and then reportable on Form 1040.
@Madison85 In the specific case of Heald (see above), the loan forgiveness is not taxable because it came about because of the failure of the institution.
I’m not a tax attorney, but generally if debt is forgiven on the basis of fraud, it is not taxable. I am sure it’s not quite that straightforward, and the precise definition of “fraud” is something that will have to be determined.
I’m confused.
First of all, I don’t see how the department of education can forgive loans that are the responsibility of the borrowers to pay back. Did Arne Duncan just wave a magic wand and say “poof” while forgiving the debt?
Secondly, why do so many here feel this is a great idea? If someone borrows money to go to college and that debt is later forgiven doesn’t that encourage people to run up a huge debt on college using monopoly money instead of borrowing wisely in the first place? Or is that just too much common sense?
This whole college debt crisis reminds me of the housing credit crisis/bubble thing where even though the lenders and banks were wrong to collaterilize the loans and resell them, and the risks with them, you still can’t pretend the borrowers were innocent victims. Victims of what? Their own stupidity? If you make $45K a year and you buy a $350K house you are too stupid to own real estate.
Same thing here. If you borrow money so that you can spend 4 years at summer camp, I mean college, then don’t come crying to me later if you can’t pay back the amount you borrowed. Waaawaaawaaa. If you can’t pay it back, don’t borrow it in the first place. This is pretty stupid if you ask me.
I’ll just quote from the Supreme Court on the purpose of bankruptcy protection:
“the federal system of bankruptcy’s …. main purpose…intends to aid the unfortunate debtor by giving him a fresh start in life, free from debts…”
Also, bankruptcy really sucks and it’s a last resort. Good luck buying a house any time within the next 10 years because until it’s wiped from your record, you might as well have zero chance at ever getting any form of credit.
Not quite. Common sense would indicate that no private party would give loans because they’re simply too risky to give.
If there were no federal loans then these bad for-profit schools could have never survived at all (reiterating that for-profit doesn’t necessarily imply bad), these schools relied on the fact that stupid people could automatically borrow from the federal government.
It’s too hard to accurately assess how good or bad of a risk one is. Except for the few most exceptional students, practically I doubt many people could get private loans if they were dischargeable. Or if they could they’d have to charge exorbitant rates to cover the loss they take on defaulting and forgiven loans. Remember, banks have other things they can do with their money. Loaning it out for college is not a good risk if it has to compete with business loans on the same terms. You’re thinking that someone going into engineering or CS should be a good risk because of the earnings potential, but if they need to borrow for freshman year the chance that they graduate in 4 years with an engineering degree just isn’t high enough.
Or the bank would simply require a co-signer with enough assets to cover repayment of the loan. Interest rates aren’t the bank’s only tool for addressing risk.
The standards would go up higher than they already are though. And again, it’ll push those from poorer families out of the grasp of college education.
Totally agree with @GoNoles85! I too am anxious to hear the definition of fraud. To see how far it might be stretched, I’ll give you an example.
My 60 year old neighbor went to our local public community college and got her AS in radiology tech. During the last semester (internship at hospital), she discovered that pushing the portable xray machines were hurting her back and she was not “young and strong enough” to manipulate patients. She never went to work in the field and fought the loan repayment based on the fact that the school had defrauded her by allowing her to pursue a degree that she couldn’t handle. (The flipside is, of course, age discrimination.) No job=No money. After years of federal loan deferments, she now makes interest-only payments. She is currently 83 years old.
Was she defrauded? Who is to blame? Old woman, admissions office, financial aid, U.S. government, or the taxpayers. I guarantee she’ll be calling me tomorrow asking me to file this claim for her!
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Perhaps, for pre-professional programs aimed at jobs requiring some level of physical fitness, the CC in question could make passing a job-related physical fitness test an early requirement (before the student gets too deeply and expensively into the program), with PE courses recommended for those who cannot pass the physical fitness test on the first try. Such a requirement can be applied regardless of age or gender, since all that matters is whether one has, or is willing to do the necessary PE activities to gain, the necessary physical fitness for the job.
And you would wasting your font: federal education loans are not dischargeable in bk court (unless Arne Duncan decides to waive his pixie dust over the loans.)
Wrong! (and you are the second person to get this wrong in this thread.) Existing law explicitly allows for these loans to be discharged when a) a school goes out of business while the student is enrolled (as is the case in the linked article) or b) when there is fraud involved.
This isn’t some crazy stretching of the law by the Obama administration.
Actually, Nick, since the gubberment is forgiving money owed to the US taxpayers, you know people who are honest, work and save, it is the definition of crazy.
Yeah, trying to collect loan repayments from a bunch of defrauded teenagers with no skills is the way to get our fiscal house in order. Good luck with that one.
Not my problem. Literally. I mean, I guess the democrats need to buy votes with policies like this, I have voted for Obama twice, I am an independent, but this is beyond ridiculous and it is infuriating. If you really believe the nonsense you are spewing why should anyone repay any loan? Just borrow money, buy something you can’t afford, and then act like a helpless victim later.
The borrowers could have gone to accredited schools or, now this is really shocking, could have down what I did. I worked until 4 am three nights a week (in a bar) and worked late a few other days and nights (as a waiter) and paid for my education. Neither one of my parents went to college. I took out federal loans and graduated from grad school with $8K in total debt (thanks to all my savings).
So, believe me, I don’t really think it is my responsibility to cover other people’s loans especially if they are lazy and not to bright.
What about all of the high schoolers that are admitted at privates and directionals with their 2.0 GPA and 21 ACT? Are they being defrauded into believing they will survive 4 years and grab a degree?